The once-high demand for Japanese products has been slowly declining over the years. Names like Sharp, Panasonic and Sony are struggling to make ends meet. All the three electronic giants from Japan are facing huge debts running into billion of dollars. While they products from Japan could last longer, their costs as compared to the cheap Chinese products keeps the customers from buying them.
In a recent survey, the rating agency Fitch revealed that Sharp would not be able to survive on its own and that it needed a bail out. But the question was that who would come forward to buy it as its nearest rivals, Panasonic and Sony too were working on shaky grounds.
The main reason cited for the Japanese conglomerates running into losses was that they had lost the mass appeal due to the loss of their technological edge and investment of billions of dollars in solar panel making factories, which was once a lucrative business.
On Thursday Sharp warned of a $5.6bn loss for the year while Panasonic cited its cumulative loss of over five years at $25bn. Among the three, Sony managed to show a profit but that was mainly attributed to the sale of a chemicals business. The company lost $5.7bn in the year 2011 while its television assembly lines have been losing money for the past years. So, it is clear that these firms need to revamp their policies and business management before stepping in to save Sharp.
The problem faced by the Japanese government is that these business conglomerates are not just the major exporters and employers of the country but they were also the biggest demanders of huge amounts of debts from the government to stay afloat. It is also true that the Japanese do not pay huge amounts of taxes to fund public benefit schemes. Therefore, the businesses mainly rely on the loans, which are still cheap in Japan. What these cheap loans are doing is only increasing the debt of the government.
The Japanese government knows that the moment they stop giving the loans to the business houses, they would cease to be employers. This would leave most of the people unemployed creating more problems for the government. Therefore, for now the Japanese MPs feel that taking a loan is the best option to stay in business. The problems for the businesses have also risen after sales to China have been hit following the dispute over the Senkaku/Diaoyu islands between Tokyo and Beijing. Therefore, what is in store for the Yen is not known; but if these conditions continue, one should not be surprised if there is a run on the Yen.
Japan Lives On Borrowed Money
